LOUISVILLE — Some Lotto Kentucky winners were paid about $5.6 million more than they should have received, the state auditor said Monday.

        The Kentucky Lottery Corp. “arbitrarily” paid the money to 79 former Lotto Kentucky winners rather than give it to state coffers, State Auditor Ed Hatchett said.

        A sale of government securities during a strong market in 1999 and 2000 resulted a windfall of $5.6 million more than necessary to satisfy the lottery's obligation to make the 20-year payments to the winners, Mr. Hatchett said.

        The lottery gave the entire windfall to the winners, he said. Mr. Hatchett contends the winners should have received $75.4 million and not the $81 million they were paid.

        “These lottery winners were not entitled to any more than the discounted value of these securities based on the purchase yield,” Mr. Hatchett said. But he acknowledged it was within the lottery's discretion to pay the money to the winners.

        The auditor's office conducted an audit of the Kentucky Lottery Corp.'s fiscal 1999 and 2000 records, which was released Monday.

        The audit showed the lottery fell $44.9 million short of a statutory goal to pay 35 percent of gross revenues to the state General Fund. The lottery paid $159.3 million in fiscal 2000 from ticket sales, or 27.3 percent, the audit said.

        “In light of the lottery's failure to meet its statutory goal of payments to the state, gifting $6 million away is difficult to justify,” Mr. Hatchett said.

        A change in federal tax laws in October 1998 allowed previous lottery winners who had chosen to receive their winnings in long-term annual payments to instead receive one lump-sum payment.

        Arch Gleason, lottery president and chief executive officer, disputed the audit's findings and said the state will receive nearly $5 million in income taxes from the winnings.

        “We totally disagree with the premise,” Mr. Gleason said. “We looked at the prevailing practices in the industry, and every lottery but one offered the same deal.”

        Mr. Gleason said the lottery held the government bonds for the players' benefit and should not have profited from their sale.

        “I would argue that if the players found out that we had profited, it would have eroded player confidence in the lottery,” he said.

        Since its inception in 1990, the lottery has not met its statutory goal of giving 35 percent of revenues to the General Fund, Mr. Hatchett said.

        Mr. Gleason said the lottery would have to reduce prize payoffs from the current 60 percent to 53 percent to reach that goal.

        “I know for certain the number of tickets we would sell would fall dramatically,” Mr. Gleason said. “Over time, we've been able to demonstrate to the legislature and political leaders it is not in their best interest to make 35 percent.”

        During the two years, the lottery paid $313.1 million to the state General Fund and an additional $8.6 million to the Affordable Housing Trust Fund.

Motorists will be seeing orange again
ACLU proceeds with racial-profiling lawsuit
Police review panel feels stymied by city
Three downtown garages will cost $31.8M
Car break-ins city-wide problem
CG&E wants bigger pipeline
More answers to your energy questions
Neighbors battle UC mansion proposal
Reagan's influence felt in Tristate
Clintons may return Cincinnatian's gift
Man charged in baby's shooting
Special-ed programs need work, CPS told
Detective tells court of bloody evidence
Teacher won't face charges, police say
Three indicted in ecstasy case
Two tax increases on ballots today
Deerfield fire levy vote tonight
Land sale means big profit
Local Digest
Plant mobilizes Sayler Park
Ky. school officials resist Bush testing plan
Special counsel to get Villa Hills records
A bump in the road for Monmouth Street project
Boone Co. Schools, teachers near deal
Kentucky Digest
Lotto winners were overpaid, auditor says
Critics attack plan for tunnel murals